US Chicken Producers: Trade Agreements Should Provide Both Access and Enforcement

June 25, 2014

WASHINGTON, D.C. – With the Obama administration actively negotiating new free trade agreements with Asia and Europe, National Chicken Council advisor Kevin Brosch testified before the Senate Committee on Finance today about the effectiveness of the enforcement of any new agreements and the trade agreements the United States already has on the books.

“We are generally supportive of all major initiatives to promote free trade, but we must make sure both our existing agreements and new agreements provide not only strong market access but also adequate means to enforce that access,” Brosch said in testimony before the Senate Committee on Finance at today’s hearing: Trade Enforcement: Using Trade Rules to Level the Playing Field for U.S. Companies and Workers.

“In our view, the prosecution of the China antidumping case before the World Trade Organization (WTO) represents U.S. trade policy at its best; enforcing those trade rights for which we already have negotiated,” Brosch said.

In 2009, China imposed antidumping duties on U.S. chicken using the so-called “weight-based cost of production” theory. Under this approach all parts of an animal are given the same value per unit of weight; and so, hamburger has the same value as filet mignon; chicken paws have the same value as chicken breast meat. Clearly, this theory is economically unsound and, for several reasons, is legally impermissible under WTO rules.

Immediately after China announced its decision to impose antidumping duties, the Obama administration requested dispute settlement, and aggressively litigated the case before the WTO. Last summer a WTO panel ruled in favor of the United States. China elected not to appeal that decision and China’s announcement of how it will change its antidumping decision to come into compliance with WTO rules is expected in July.
“China represented a 700,000 Metric Ton market for U.S. poultry at the time the antidumping duties were imposed, and is potentially an even larger market for our products in the future,” Brosch said. “We are grateful to this administration for pursuing our rights in this case.”

But there have been some very significant disappointments and we have learned some difficult lessons over the past 20 years. Using examples of cases in Mexico, the European Union and South Africa, Brosch said the first lesson is “that enforcement of trade agreements must become more automatic and timely.” For example:

The United States’ case against Mexico was instituted nearly two years ago, after an antidumping case which was also brought on the very dubious “weight-based cost of production” theory. At present, we still do not have a panel to hear the case. We believe there is a significant problem here of enforcement that needs to be addressed.

The U.S. poultry industry asked that the EU be taken to dispute settlement as there was no scientific basis for the EU’s trade barriers on U.S. poultry imports which began in 1996. For reasons that have never been explained, the United States and the EU have taken no actions to form a panel over the past four years, and there is no indication that our government is pursuing enforcement of the case at present.

Another longstanding problem has been with enforcement of our right against the unfair and protectionist practices of the Republic of South Africa (RSA). Because the United States has not challenged the RSA at the WTO and enforced our rights, we have been entirely shut out of the South African market for 15 years. The U.S. poultry industry believes this must be addressed before Congress would be justified in extending the African Growth Opportunity Act programs.

“With respect to the Trans Pacific Partnership (TPP),” Brosch continued, “Our major goals are to get a strong commitment on enforcement, in particular in the area of sanitary and phytosanitary (SPS) measures. Our second major ambition is to see that the long-protected Canadian market is finally opened to trade, which should have been opened to free trade as a result of NAFTA. If TPP is truly a free trade agreement, then there should be free trade in poultry between the United States and Canada, not just one-way market access for Canada.

“We are frankly less sanguine about the prospects for poultry under the proposed Transatlantic Trade and Investment Partnership (TTIP) agreement with Europe. The ban currently imposed by EU regulations on importation of U.S. chicken because of our safe and proven use of chlorinated water as an antimicrobial is not based on sound science and is inconsistent with WTO rules. TTIP would only be of use to our industry if the negotiations resulted in the removal of these SPS barriers that Europe has had in place for nearly 18 years.”

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Chicken is one of the United States’ most important agricultural products, and one of our most important agricultural exports. U.S. production value in 2013 was $30.7 billion. The United States is the world’s second largest exporter, only narrowly behind Brazil, and in 2013 we exported nearly 20 percent of our total volume of production, with an export value of more than $4.7 billion. U.S. poultry is our 6th most important agricultural export, with product being exported to nearly 100 countries each year. It has also been an important growth sector for U.S. agriculture with exports increasing from 5.2 percent of production volume in 1990, to nearly 20 percent in 2013.

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The National Chicken Council is the trade association, based in Washington, DC, for the companies that raise broiler chickens and make and market chicken products. Member companies of NCC provide about 95 percent of the chicken products on America’s table.